India to enhance capital infusion into PSU banks

New Delhi, Oct 3 (IANS) The government Thursday decided to substantially enhance capital infusion into public sector banks to enable them provide cheap loans for two-wheelers and consumer durables to stimulate demand.

The decision was taken at a meeting of the top economic policymakers that included Finance Minister P. Chidambaram, Reserve Bank of India Governor Raghuram Rajan and Economic Affairs Secretary Arvind Mayaram.

"The central government has decided in principle to enhance the amount of capital to be infused into Public Sector Banks," the finance ministry said in a statement after the meeting here.

In the union budget for the current financial year announced in February, Rs.14,000 crore was earmarked for capital infusion.

"This amount will be enhanced sufficiently," the ministry said.

The additional amount of capital will be provided to banks to enable them to lend to borrowers in selected sectors such as two-wheelers, consumer durables etc, at lower rates to stimulate demand.

"While this will bring relief to the consumers, especially the middle class, it is also expected to give a boost to capacity addition, employment and production," it said.